For three years, a small hospital east of Los Angeles has billed Medicare for the costs of confronting what appears to be a cardiac crisis of unprecedented dimension.

From 2008 through 2010, Chino Valley Medical Center in San Bernardino County claimed that 35.2 percent of its Medicare patients were suffering from acute heart failure - a dangerous, often-deadly breakdown in the heart's ability to pump blood.

That's six times the state average, according to a California Watch analysis of Medicare billing data.

The hospital appears to have taken advantage of Medicare rule changes that authorized bonus payments for treating patients with major complications.

In 2006, before Medicare began making bonus payments, the hospital reported no acute heart failure cases, records show. From 2008 through 2010, after the new reimbursement system was phased in, the hospital said it treated 1,971 Medicare patients for acute heart failure, according to the billing data.

Bonus payment trigger

Without access to internal records, it's impossible to determine how Prime billed for its cases of acute heart failure. But in 88 percent of the cases, it was listed as a secondary diagnosis that typically would trigger bonus payments.

Prime attorney Anthony Glassman said in a letter that the heart failure diagnoses at Chino Valley were accurate and were made by treating physicians, not the hospital itself. He said California's Watch's analysis was "faulty, unfair and biased."

Chino Valley has a high rate of acute heart failure because its patients are especially prone to the ailment, Glassman wrote: Compared with other hospitals, more patients come from nursing homes, and an "exceptionally high" number of heart patients are admitted via the emergency department.

But when California Watch excluded patients from nursing homes and focused solely on patients admitted from the emergency room, the acute heart failure rate at Chino Valley dropped only 1.5 percentage points, to 33.7 percent - still the highest in California and five times the state rate.

Two heart specialists said it would be unlikely for a hospital to have a heart failure rate anywhere near what has been claimed at Chino Valley.

"Acute heart failure is very prevalent, as you know," he said. "However, there is no way of explaining" Chino Valley's high rate, he said. "It doesn't make any sense."

Experts suspicious

Both experts said they suspected the high rate at Chino Valley reflects exaggerated diagnoses by doctors or by the hospital's coders, who prepare computerized Medicare bills to obtain reimbursement from the government.

California Watch's analysis focused on Medicare billing data provided by the hospitals and compiled by the state Office of Statewide Health Planning and Development. The analysis looked at every general hospital in the state that treated at least 300 Medicare patients age 65 and older per year - 273 hospitals in all. Convalescent hospitals were excluded, as were the hospitals in the Kaiser Permanente managed-care chain because of billing differences.

The surge of heart failure cases at Chino Valley and other Prime hospitals comes as the chain, based in Ontario, is the target of a federal investigation for suspected Medicare fraud involving "upcoding" - billings deliberately exaggerated to obtain big payouts from the government.

That probe, by the U.S. Department of Health and Human Services, was requested by two lawmakers in response to the chain's high rate of blood infections known as septicemia, federal records show. The company has denied wrongdoing.

As California Watch has reported, state records show Prime also has claimed high rates of other conditions entitling the chain to treatment bonuses from Medicare. Among them: an unusual brain injury called encephalopathy and kwashiorkor, a form of malnutrition found among Third World children.

As part of a bitter inter-hospital billing dispute playing out in Los Angeles County Superior Court, the Kaiser Foundation Health Plan has accused Prime of "routinely" upcoding heart failure "to deliberately overcharge by false billing."

Earlier this month Prime sued Kaiser and the Service Employees International Union, accusing them of conspiring to drive Prime from the Southern California health care market in violation of antitrust laws.

Acute heart failure is the sudden malfunction of one of the heart's ventricles, chambers of the heart that pump blood to the lungs and supply oxygenated blood to the rest of the body.

Bonus for severe condition

As America ages, acute and chronic heart failure is an increasing problem. About 5 million Americans are afflicted and 500,000 cases are recorded each year, according to The Merck Manual medical reference guide. About 30 percent of people who are hospitalized with the condition die within a year.

People suffering from acute heart failure often complain of shortness of breath after only mild exertion or even upon waking from a sound sleep. Drugs and surgery may be used for treatment.

Medicare classifies acute heart failure as a particularly severe condition, one that is costly to treat. As a result, it is among hundreds of serious medical conditions classified as a "major complication" and eligible for a bonus treatment payment.

For example, federal records show that Medicare pays about $5,522 for treating a patient with the infection known as Legionnaires' disease. But Medicare pays about $11,377 - $5,855 more - if the same patient is also diagnosed with acute heart failure.

The payout bonus for acute heart failure can be much greater if surgery is involved. A Medicare reimbursement primer prepared by Boston Scientific Corp. cites the case of a cardiac patient who needs a defibrillator. The payout from Medicare could rise by $22,000 - from $30,000 to $52,000 - if the patient also is diagnosed with acute heart failure.

Medicare pays hospitals according to computerized bills prepared by coders, personnel who consult physician notes in medical charts to document diagnoses and treatment.

Coders' lawsuit

Some former Prime coders have contended that Reddy, the company founder, coached them on strategies to ensure maximum payout from Medicare.

Sandy Barber, a coding supervisor who worked at Prime's Desert Valley Hospital in Victorville in San Bernardino County, testified in a 2005 employment lawsuit that Reddy convened meetings where he "ordered" coders to engage in illegal upcoding to boost reimbursements from Medicare.

In his letter, Prime lawyer Glassman called Barber's claims "unproven" and said she hadn't worked for Prime in 10 years. He said Prime rarely gets paid more money for treating Medicare patients with acute heart failure because they often are diagnosed with other complications as well.

Medicare pays for only one complication per case, no matter how many complications are noted on the bill. Thus, in many cases, the company would be entitled to a Medicare bonus payment even if acute heart failure were deleted from the bill, Glassman indicated.

Award-winning hospital

Chino Valley Medical Center itself shows no outward signs that it is confronting a health care crisis, people familiar with the institution say. It's a 126-bed facility that Prime obtained in 2004 after the prior owners, a physicians group, went bankrupt.

Since then, Prime says it has spent $10 million upgrading the hospital. Among the improvements, according to its website: a state-of-the-art cardiovascular lab, where angioplasties and stent placements are performed to treat coronary artery disease.

The hospital's chief medical officer, Dr. James Lally, has been honored by the American Heart Association for screening thousands of local high school athletes for heart problems.

The hospital has won the HealthGrades excellence award for emergency medicine two years running, in 2010 and 2011, and a five-star rating for treatment of heart failure. That rating was based on the survival rate of heart patients: Mortality rates, at the time of hospitalization and six months later, were much better than expected, the rating service said.

The California Watch analysis found that Chino Valley reported no cases of acute heart failure in 2006. In 2007, as Medicare phased in its system of bonus payouts for treating medical complications, the hospital reported 109 cases - a rate of 5.8 percent of Medicare admissions. Around California, 63 other hospitals that had reported no acute heart failure in 2006 also began recording cases of the ailment.

Number of cases explodes

In 2008, the acute heart failure rate at Chino Valley exploded - 729 cases, or 39.8 percent of Medicare admissions. It remained consistently high through 2010, the last year for which data were available. From 2008 to 2010, of 5,596 Medicare patients 1,971 were diagnosed with acute heart failure.

In all but 235 cases, acute heart failure was noted as a secondary diagnosis - and thus eligible for a bonus payout. Those numbers underscore concerns about the accuracy of the diagnosis, said Fonarow, the UCLA expert.

"The rates where acute heart failure is a secondary diagnosis are much higher than generally expected," he wrote in an e-mail. "This suggests the potential for misclassification at the physician chart documentation or hospital coding level."